Home construction at low as affordability suffers

By Natalie Craig

18 June 2008 — 12:00am

HOME building starts have suffered their biggest fall in two years for the March quarter, an indication that rising interest rates and a slowing economy are continuing to take their toll on affordability and the house-building sector.

Dwelling starts fell by 3.3% in the March quarter, according to the Australian Bureau of Statistics - the largest quarterly decline since the December quarter of 2005.

Housing Industry Association chief economist Harley Dale said rising living costs and interest rates meant that figures for the construction of new residences would only worsen. "One of the main reminders from these figures is that the whole of 2008 is probably going to be a challenging year for new-home building," Mr Dale said.

Detached housing starts dropped 5.4% while starts for residences other than houses, such as apartments, grew by 2.4%.

"It's encouraging to see an increase in apartment building, even if it's a modest one, but it's not enough to get excited about," Mr Dale said.

He said the number of dwellings on which construction began in the past year was 25,000 short of the figure required to meet demand, and that continued high immigration and population growth would worsen the housing shortage. House builders were also suffering from the skills shortage and the increased cost of transport and materials such as steel.

Victoria performed better than most states: the seasonally adjusted number of housing starts in the March quarter was down 4.8%, compared with drops of 7.3% in Western Australia, 13.3% in Tasmania and 16.9% in ACT.

Starts were up by 24.7% in South Australia and 9.3% in NSW. But the number of dwellings begun in the year to March in NSW, at 29,790, was the lowest in 38 years, reflecting land shortages, a slower approvals process and higher taxes.